BREAKING NEWS: Australia authorities sues Lyoness; alleges pyramid scheme and referral selling

According to press release from ACCC (Australian Competition and Consumer Commission) has launched a lawsuit to shut down Lyoness and related entities from operating in Australia. According to ACCC: 

The ACCC alleges that Lyoness has operated the scheme in Australia from mid-2011 and that it continues to operate the scheme. The scheme offers ‘cash back’ rebates to members who shop through a Lyoness portal, use Lyoness vouchers or present their Lyoness card at certain retailers. 

Whilst cash back offers themselves are not prohibited by the Australian Consumer Law (ACL), the ACCC alleges that the Lyoness scheme also offers commissions to members who recruit new members who make a down payment on future shopping.

... 

“Under the Australian Consumer Law, it is illegal not only to establish or promote a pyramid scheme, but also to participate in one in any capacity," Mr Sims said. 

The ACCC also alleges that the conduct by Lyoness breached the ACL prohibition on ‘referral selling’, where a consumer is induced to buy goods or services by the promise of a commission or rebate contingent on a later event.

First hearing is set for September 16, 2014 in Australia. No word from Lyoness just yet.

(Thanks for BehindMLM and PatrickPretty for the heads-up)

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MLM Basics: Is MLM considered entrepreneurship?

A recent discussion regarding a certain suspect MLM already fined in Europe for pyramid selling brought up an interesting point of discussion... Is participation in MLM considered entrepreneurship?

But first, what exactly is entrepreneurship?

BusinessDictionary.com defined it as "The capacity and willingness to develop, organize and manage a business venture along with any of its risks in order to make a profit."

From the surface, it does appear that participating in network marketing could be considered a business venture, but again, we have to look a little deeper: is becoming an IBO / affiliate a "business venture"?

Same place defined "business venture" as "Start-up entity developed with the intent of profiting financially. A business venture may also be considered a small business."

Ah, here lies the problem.

Most network marketing company deal with you as a hybrid... You're not a business (so it's not a business to business) but you're NOT an employee either. You are an "independent contractor". Here, for example, is Amway's agreement on this specific topic:

3. Independent Contractor Status. You agree this authorization does not make you an employee, agent, or legal representative of Amway, your sponsoring IBO, or any other IBO. As a self-employed independent contractor, you will be operating your own independent business, buying and selling products and services available through and by Amway on your own account. You have complete freedom in determining the number of hours that you will devote to your business, and you have the sole discretion of scheduling such hours. Amway will not provide you with a place of business, and if you desire a place of business other than your own residence, you will be responsible for procuring, furnishing, and paying the rental for such place of business. As a self-employed independent contractor, you are responsible for complying with any provincial licensing requirements and Municipal Zoning and Business Licensing By-Laws. With respect to services performed by you under your IBO Contract, you will not be treated as an employee for federal or provincial tax purposes, and you will be responsible for
payment of any self-employment and other income taxes. 

Well, Amway certain wants you to think you own an "independent business". In fact, they refer to all of their distributors as "IBOs"... Independent Business Owners. And you are REQUIRED to print that on your business card.

So what's the problem? The problem is in the PROFIT motive. Being an entrepreneur means you intend to profit.

Yet for a MAJORITY of participants in network marketing, apparently profit is NOT a motive.

You're probably going, WHAT?!  Let me give you examples:

The Woo Files: MLM Viagra Coffee (no, I'm not kidding, and it's illegal)

There are all sorts of "fortified" coffee, containing all sorts of stuff that's allegedly good for you, from Asian mushrooms (Lingzhi) to various uber(woo) fruits like Acai berries, goji berries, to various forms of vitamins. So it's really no surprise when someone made coffee with allegedly "all natural herbs" to raise your libido, eh? 

Meet "Magic Power Coffee", world's first (and last?) aphrodisiac coffee.

Now, you may say, this is cute and stuff, but what does it have to do with MLM? Ah, but look at the words "income opportunity". Yes, this is a MLM.

Quoting from a recruitment website :

Start Your Magic Power Home Business Today Start as a Standard Associate for only $70.00 plus a one time $15.00 administration fee. Quickly break even, operate for FREE, and build your Home Based Business part time until it exceeds your primary income source

Furthermore:

The Magic Power Coffee Home Business Opportunity provides multiple income streams. They are covered below.

Personal Enrollments:
Each time a member joins the home business opportunity via your invitation you are awarded $15.00 to $45.00 depending upon their membership level... To keep it simple and free, enroll three.

Matrix:
When you introduce and invite others to become members they too establish their own Home Business. You are accredited through a 3 X 10 matrix system for those who fall within the three positions below you. ...

Matching Bonuses:
Matrix Bonuses are percentage matched down 6 generations of each individually sponsored member

Retail Sales:
Retail sales of Magic Power Coffee and the Magic Power Product line generate commissions...

Leadership Pool:
3% of the entire company product are sales set aside and distributed proportionately as you reach certain milestones. The Tour will explain this best, but the award amounts are substantial.

Thus, there is no doubt this is MLM, right? Except the product is ILLEGAL, as it is NOT all natural, as it claimed.